Retailers plan to press forward with 5 percent sales tax question

BOSTON -- Retailers plan to gather signatures and move forward with a potential 2018 ballot question reducing the sales tax to 5 percent and instituting an annual sales tax holiday, the News Service has confirmed.

If the Retailers Association of Massachusetts (RAM) follows through on its initiative petition, voters next year could have two tax questions on the ballot - one to hike taxes on incomes over $1 million and another to reduce the sales tax from its current rate of 6.25 percent.

RAM filed four proposed ballot questions with the attorney general's office in August, and only recently decided to put its organization behind one. The alternatives that RAM decided to abandon included combinations of dropping the sales tax to 4.5 percent and including or excluding the sales tax holiday.

The first test for retailers and tax relief proponents will be whether they can amass 64,750 certified signatures from voters around the state by Nov. 22. The group plans to start collecting signatures this weekend.

"Reducing the state sales tax to 5 percent, coupled with an annual sales tax holiday weekend, will provide much needed relief to small businesses while significantly benefiting seniors and working poor who pay a disproportionate amount of their income in sales tax," RAM President Jon Hurst said in a statement to the News Service.

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Geoff Diehl, a Whitman Republican who is running to unseat U.S. Sen. Elizabeth Warren next year, has offered the help of his campaign volunteers to collect 10,000 raw signatures for the retailers' effort. Diehl was a leader in the successful effort to repeal a law that would have raised the gas tax automatically with inflation. Voters supported that repeal 53 percent to 47 percent on the 2014 ballot.

Competing against tax-free sellers in New Hampshire and online, store owners have had to budget in a minimum wage increase, rising health care costs and some of the highest energy costs in the continental United States. Activists are gearing up to raise the minimum wage to $15 per hour via the 2018 ballot.

The Legislature has the opportunity to step in and address any issue raised by campaigns that are pressing ahead with ballot questions.

The sales tax holiday, which offered consumers a weekend of mostly tax-free shopping, had become an almost annual fixture in Massachusetts over the past decade, but for the past two years it has failed to gain the necessary support of the Legislature. Lawmakers increased the sales tax to 6.25 percent in 2009 when state revenues were severely hampered by the Great Recession.

"RAM represents more than 3,500 small retailers that populate the Main Streets of the cities and towns of the Commonwealth, provide good paying jobs, and bring vibrancy and economic vitality to their communities. Unfortunately, far too many of these businesses are struggling due to tax-free competition from New Hampshire and online sellers," Hurst said. "By reducing the sales tax and coupling it with an annual sales tax holiday each year, we can give these businesses and their employees a fighting chance to compete and survive."

Sales tax revenues are a major component of the state's $39.4 billion fiscal 2018 budget. In fiscal 2017, the state collected $6.21 billion in sale taxes.

"We are fully aware that our proposal will likely be part of a conversation about the fairness of our state tax code, and feel a reduction in the sales tax deserves to be included in that dialogue," Hurst said. "The reality is that the sales tax is the most regressive form of taxation in the Commonwealth and reducing it will significantly help those at the bottom of the income ladder, especially seniors and low income families."

Gov. Charlie Baker, a Republican who previously supported reducing the sales tax to 5 percent, has yet to take a firm position on reducing the sales tax or hiking taxes on the state's highest earners.

"That one has a long way to go before it ends up coming before the voters and if it does, obviously, we'll talk about it then, but I did support back in 2010 the idea of reducing the sales tax from 6.2 to five and there's no question that retailers in Massachusetts face tremendous competition and pressure from our colleagues north of the border who don't have a sales tax at all," Baker told reporters in March.

The income tax question would change the state's constitution and it is already headed for the 2018 ballot after receiving required endorsements from the Legislature the past two sessions.

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